Oil's price is rising, but doubts remain

The cost of crude oil continues to rise, although the dynamics are still a bit confusing. The raw materials of the WTI brand remain almost motionless today, which, of course, can be considered more positive than negative in the current situation. However, both grades of black gold have been showing an increase for six consecutive weeks following the results of a week’s work. The main factor that makes oil to remain positive is the willingness of OPEC member countries to continue agreements to reduce the extraction of raw materials on their territory in order to maintain and stimulate demand.

This week, the news from OPEC was very mixed. So, the decision of Russia and Saudi Arabia that oil production in their countries will continue to decline for another period leads to a positive moment. It can be recalled that the question was quite sharp, since the Russian Federation expressed clear doubts about the need for this step. However, the parties seem to have reached a consensus. At least, the reduction in July will continue, and further actions will be taken based on the situation on world markets.

However, there is also some negativity that makes investors Express doubts about the success of the new stage of agreements. If at least one of the participating countries does not fulfill its obligations under the deal, the agreement risks being completely disrupted. There are already two States that have not taken their obligations too seriously. These include, in particular, Nigeria and Iraq, which are in no hurry to implement the deal in full. Of course, such sentiments can not be ignored by market participants, which in turn contributes a certain amount of uncertainty.

Today, statistics show that the OPEC group was able to achieve a reduction in crude production by 8.6 million barrels per day, which corresponds to 89% of the deal. For the full 100% fulfillment of the contract, it is necessary to reduce production by another 1.1 million barrels per day, which is what the countries plan to do this month.

However, it is still necessary to reach an agreement on the extension of the transaction between all members of the organization, which is planned to be done in the near future. So, on June 6, a meeting of OPEC ministers is scheduled, at which it may already be possible to sign part of the agreements. A little earlier, there was news that the meeting of the technical committee would not take place on June 5, as planned, but on the 17th, and the ministerial meeting would not be on June 8, but on the 18th. If this transfer takes place, the oil market will feel a new wave of tension.

As for the supply, demand is not growing too much and can provide significant support while there is a surplus in the oil market. It is this fact that should stimulate states to make an early decision to further reduce production. Otherwise, the whole process aimed at establishing equilibrium can be undermined, which, of course, can be called a new wave of crisis, which no one wants.

The mood of the investor remains unshakable: even statistics on oil reserves in the United States of America are not able to affect it now. It can be noted that there was a decline in commercial stocks by 0.4% last week, which corresponds to 2.077 million barrels. On the contrary, gasoline inventories rapidly increased by 2.8 million barrels, although experts speculated that there would be an increase of no more than 1 million barrels. At the same time, there were reports that the demand for diesel fuel continues to fall: it has already reached its lowest levels in the last twenty-odd years. All this is further evidence that the US economy will not be able to quickly get out of the crisis.

This morning, on a trading floor in London, prices for Brent crude oil futures for August delivery rose by 0.53%, or 0.21 dollars, which allowed them to move to the line at 40.20 dollars per barrel. It can be recalled that at the close of yesterday’s trading, growth of 0.5%, or $ 0.2, was also recorded, and the price stopped at around $ 39.99 per barrel.

Meanwhile, on the electronic trading platform in New York, WTI crude oil futures for July delivery slightly increased by 0.05%, or 0.02 dollars, sending them to a level of 37.41 dollars per barrel.

In general, oil of both brands increased its value by about 6% over the current week, which cannot be considered a good result. Therefore, further movement will be determined by the OPEC decision.

Most analysts believe that the growth of crude oil will continue until at least Monday until the details of the OPEC ministerial meeting are known and there is certainty regarding the ratification of the second stage of the deal to reduce production.

Source: Oil's price is rising, but doubts remain

Spread the love
 

Related Articles

Leave a Reply

%d bloggers like this:

Our website uses cookies and thereby collects information about your visit to improve our website (by analyzing), show you Social Media content and relevant advertisements. Please see our cookies page for furher details or agree by clicking the 'Accept' button.

blank